Honeywell CEO: Boomer Retirement ‘Will Crush the System’

Senior Editor

Retiring baby boomers will “literally crush the system,” so deficit reduction must be addressed before the U.S. finds itself on the hook for $1 trillion a year in debt interest payments alone Honeywell International Inc. Chairman and Chief Executive David Cote told an audience of chief financial officers on Monday evening.

Given “entitlements” like Medicare, “I was shocked by … how bad it would get over the next 10 years,” Mr. Cote said in a wide-ranging discussion at the third annual Wall Street Journal CFO Network conference in Washington, D.C. Mr. Cote, who in 2010 was named by President Obama to serve on the Simpson-Bowles Commission to help address the country’s deficit problems, said the U.S. can either deal with the problem now, “thoughtfully and proactively,” or it can wait until the debt load becomes crippling.

Mr. Cote said he is cautious about the global recovery, and said Honeywell is modeling for average inflation-adjusted gross-domestic-product growth of 2% annually in the U.S. over the next three years. It plans on no growth in Europe during that time, 4% a year in India and 6% to 7% yearly in China, he said, because it’s “not worth betting anything bigger.”

It’s “tough to see what a catalyst for growth [would look like],” he added.

Mr. Cote said his board unanimously supported his time-consuming foray into the public sector, and took issue with the notion that the efforts to reform the system are losing ground. Though “the task is really, really big … the rock slowly, inexorably rolls upward,” he said.

Still, he said his job at Honeywell is “immensely more gratifying and rewarding.”

“Oh God, no,” Mr. Cote responded, when asked by Alan Murray, president of the Pew Research Center and senior contributing editor of The Wall Street Journal, whether his work on the commission presages a run for elected office later in life. “God, no,” he repeated.

On the subject of cybersecurity, Mr. Cote said it “worries me more than anything” that he feels isn’t in his control. He said there should be harsher sentences for cybercrimes than currently are given and that treaties need to be signed to govern such crimes when they are committed across borders.

When asked if he was bothered by receiving just 59% support as a J.P. Morgan Chase & Co. director by shareholders at the bank’s recent annual meeting, he quipped that his experience in Washington made him “recognize that as a mandate.”

He said there is too much focus these days on good corporate governance being akin to the election of public officials. The American people want sustainability from the government, and are willing to put up with the inefficiency of government as a consequence, whereas in business you must be willing to accept risk-taking to achieve efficiency and returns, he said. “Treating companies like a democracy is ‘failure mode’,” he added.

Instead, he said boards of directors should remain focused on making sure the correct management team is in place, succession plans are in order and on making sure their firms “don’t do a deal that kills [them].”

Mr. Cote, a former CFO, said CFOs can make good CEOs, but not if they only “sit in the office and do finance stuff,” but rather immerse themselves in all areas of the business.

Honeywell’s divisional CFOs are often top candidates on other companies’ and recruiters’ CFO wish lists, so it’s important to make them happy by creating an exciting place to work, as “90% of people want to be part of something bigger than themselves that’s successful,” he said.

While Mr. Cote believes in tax reform, and wants to make repatriation of overseas cash easier, and the tax burdens smaller, he said he’s not in favor of a complete repatriation free-for-all. In a nod to criticisms by some U.S. politicians, especially as relates to technology companies, Mr. Cote said he doesn’t believe it is appropriate for companies to design products in the U.S., and receive tax breaks and research-and-development tax credits, only to transfer the licenses and sales of the product to a low- or no-tax foreign jurisdiction.

Comments (5 of 9)

Current country situation is a product of changing times and bad administrations, which we own. We elected them. We need to figure out how to fire them and elect the correct ones, as needed Tough job, but needs to be done somehow. If we need to retire later because we ive longer, that is fine. Just do not fire us prematurely. Help us compete by re-training, new education, tuition reimbusement (what happened to that HON?). We older folks have VERY MUCH to offer. As far as Honeywell, Cote was hire to do a job for X (lots) of dollars. I would say he has been doing a pretty good job, although with some pretty unpopular moves. I do not mind letting China do the mundane stuff... just allow me now to do the great stuff. Honeywell as company is doing well, although there continues to lack in some important areas, such as employee satisfaction. Got to fix that.

7:03 pm June 18, 2013

+25 Honeywell employee wrote:

The only boomer I see here is his mouth.

7:02 pm June 18, 2013

25+ Honeywell employee wrote:

This worker hating CEO has been pushing the US to fix it's debt, so when congress uses a sequester as part of fixing it this low-life uses it as an excuse to not give any employee raises this year even though we made it billions, but yet he received HIS huge bonus.
Cody is a hippocrite plane and simple.

4:51 pm June 18, 2013

roger wrote:

So it is my generation that is going to crush the system. Hmm, can i look at the generation before my generation that set up all these socialistic ponzi systems. and your going to tell me that the "greatest generation", did not know they were setting up SS, Medicare and Medicaid, that would one day so swamp the US in debt, then i have 50,000 million acres to sell to. give me a break. Crooked pol,s just wanted to be elected back then and promised all these " entitlement programs" that they knew they would not be around to see them implode . Jerks, scum bags in Congress. How about just telling the truth Congress. there is no such thing as a "free lunch" just like planting seeds. Greatest Generation planted seeds and now those seeds are coming up every where in Congress and it is all this debt that is eating us alive.

4:02 pm June 18, 2013

Wayne wrote:

Dave cote is riding high on his new found ceberity status but like all cebrities, there is no real substance behind the mask. Dave cote is good at covering the realities of his company. He hold up the latest and greatest products to divert your attention from the steaming pile of rotting fruit that drains the compnay's resources. Fortunatly there is a heavy middle management sector working hard to invent new-old business theories to insure Dave Cote is succesful in diverting your attention. Oh, look at the pretty charts and graphs.

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